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Closing Comments

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Closing Comments

In Corn,  news has been fairly quiet with the excitement of the election and USDA report last week out of the way, and harvest coming to a close, as corn trended down slightly, – 3 (Dec).  Fund buyers picked up 10,000 contracts of corn Tuesday, reducing their shorts to 40,000.  Today, attention turned to the EIA reports, which showed ethanol stocks down – 620K bbl (18.61 mln bbl), combined with ethanol production up +15K bbl to 1.02 mln bbl/day.  The reduction in stocks is significant as production rates are much higher than historically, and the stocks represent just 18.3 days of production at present levels.  Ethanol continues to be a strong underlying support in the face of record yields announced by the USDA last week.  In exports, Taiwan bought a cargo of U.S. corn of 65K mt for Feb/March.  However, Taiwan is not the best barometer for export strength, as they are somewhat of a captive buyer.

 

Soybeans showed weakness in the trade today after rallying briefly at open, – 3 ¾.  The USDA reported another private sale to China of 165K mt for 16/17.  This strong demand from China (they are continuing to experience favorable crush margins) is providing solid underlying support to the market, despite record yields.  Interior basis continues to improve as farmers transition to post-harvest. 

 

Wheat is having a hard time finding a spark, with a mixed bag of range bound trade highlighting Chicago – 2, KC – 4 ½ , and MN + 4 ½.  The weakening Euro has had a positive influence on Matif wheat, up a few ticks.  Ukraine’s ag ministry is reporting their harvest to be 93% complete, with yields estimated to increase to 4.46 mt/ha compared to last year’s 4.10 mt/ha.  However, both Ukraine and China are having to deal with poor late season harvest weather.  Here stateside, we will finally be getting a little more of a seasonal blast, with the first major freeze in the southern Belt and the potential for a snowstorm in the High Plains.

 

Cattle were up in a bullish manner across both complexes, with Feeder Cattle futures +2.30 and Live Cattle +2.725.  Price direction this week will be watched closely by traders, influenced by the mid-week online cattle auction and cash trades.  Slaughter volumes have continued to be large for current capacities.  The cattle on feed report is due out on Friday and traders are looking for a rare year-over-year decline in “on feed” inventory to shake things up.  The expectation is October cattle on feed placements at 96% and marketings up to 105% of levels last year.

 

Hogs showed a nice bounce back today, up 1.90.  It has been a constant tug-of-war with over-abundant supplies weighting down the market.  An interesting emerging trend in Japan (considered the most powerful consumer of pork worldwide) that is fueling intense competition, is an appetite for pricey pork.  Japanese customers are showing a willingness to pay a handsome premium for pigs from the U.S. and Canada that have been raised with as much as 12 times more rest (to prevent dryness) and on a diet of unconventional rations, some including mint and ginger.  One producer has even gone so far as to open an eatery in a trendy district of Tokyo to showcase its pork.  U.S. exporters shipped 147K tonnes of chilled pork to Japan between January and August, which is a record-breaking pace.

 

Closing Market Snapshot

 

 

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading and may not be suitable for all investors.

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